In East Allenheads Estates Ltd v CRC (2015) TC04513, the First Tier Tribunal (FTT) dismissed a claim for Enterprise Investment Scheme (EIS) deferral relief. The company was not a qualifying company at the time of the investment.

  • The taxpayer owned and operate a grouse shooting moor.
  • The lands were transferred from the personal ownership of the sole director and shareholder, Mr Herrmann, who retained the ownership of Allenheads Hall, a property used to provide luxury accommodation to clients of the business. Mr Herrmann did not live at this property.
  • Mr Herrmann put £6.5million into the company in July 2007 and claimed reinvestment relief.  
  • Most of this money was spent on improvements and luxury antiques and artwork for Allenheads Hall.
  • HMRC denied the claim and after lengthy argument and counter-argument, Mr Herrmann appealed to the First Tier Tribunal citing, amongst other things, that the business was aimed at the ‘super-rich’ and the expenditure was therefore necessary to create an appropriate setting.

Decision

The Tribunal dismissed the appeal.

  • The significant expenditure on the Hall conferred a personal benefit on Mr Herrmann and could not be viewed as forming part of the company’s wider purpose of carrying on a commercial trade. It could not therefore be considered to be solely existing for the purpose of carrying on such a trade.
  • Due to the first finding, it could not be said that the shares had been issued to raise money for a qualifying trade.
  • It would not be possible, given the above, to accept that the money had been employed for a qualifying purpose within the requisite time limit.

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